Performance Review

Whitnie Low Narcisse, head of advisory programs at First Round Capital, has run three rounds of mentorships since launching the venture firm’s mentoring program in 2016, bringing together 100 mentor-mentee pairs. First Round Reviewpasses along some of the key lessons Narcisse has learned about how to cultivate a successful mentorship. Her first rule? Don’t call it a “mentorship”:

A little ironic for an article all about mentorship, but nearly all of the mentors we spoke to identified use of the word as the number one reason they were dissuaded or disinclined to talk to someone. It carries some negative connotations with it: it’s a time suck, it implies a very close relationship with someone you may barely know, it sounds like a long-term commitment. Direct asks like, “Will you mentor me?” are a universal turn off. …

To this point, if you’re a mentee sending an ask, you want to be very clear and explicit about why you targeted this person. Do enough homework to briefly explain why you’re looking for guidance relevant to their experience. That way, you don’t have to use the word ‘mentor.’ Instead, you’re inviting them to apply their considerable knowledge on something they’ll find intellectually engaging and impactful. That’s how people want to feel — not that they’re taking on an additional obligation.

Narcisse recommends an approach to mentorship that is formal yet flexible. Mentors and mentees should commit to a series of regularly scheduled meetings, mentees should prepare a focused agenda for each meeting, and the pair should set specific goals together and measure progress—but the schedule shouldn’t be too rigid, meetings shouldn’t feel like lectures or question-and-answer sessions, and goal-setting doesn’t mean homework. Most importantly, mentorship shouldn’t be a one-way street.

Much of Narcisse’s advice can also apply to the challenge of asking someone in a more senior position in your company, especially your manager, for help and feedback in the context of performance management.

In its latest innovation to its performance management process, Goldman Sachs is introducing a system of ongoing feedback in which employees’ annual performance reviews will be augmented with regular check-ins with their managers and peers. Edith Cooper, the investment bank’s head of human capital management, tells the Wall Street Journal’s Liz Hoffman that annual reviews will remain central to determining promotions, compensation, and bonuses, but with more frequent feedback, the company hopes to make these reviews somewhat less nerve-wracking and more productive:

Goldman’s new system is based on software the firm already used in a few divisions last year. It is now being extended to the rest of Goldman’s 35,000 employees. … The idea is that after a big client pitch or product launch, employees can get quick feedback instead of waiting until year-end, Ms. Cooper said. A real-time sense of where they stand allows employees to make improvements and avoid feeling blindsided later on, she added.

The evolution of performance management is at an inflection point as businesses look for new ways to accurately measure employee performance and give the right kind of feedback to improve it most effectively. Over the past year and a half, many major employers have either abandoned or radically reformed their performance rating systems, moving toward more qualitative and continuous feedback, and in some cases scrapping the the traditional annual review entirely.

The rationale behind these changes has been to engage employees more constructively in the performance management process, but CEB research has cast doubt on whether this really works. Looking at companies that have ditched ratings, we found that less than 5 percent of managers were able to effectively manage employees without them, while getting rid of ratings had a negative impact on the quality of manager conversations, employee satisfaction with pay differentiation, and overall engagement.

Performance management is in need of reform at many, perhaps most organizations, but simply getting rid of ratings doesn’t seem to do the trick. Ultimately, ratings tell employees where they stand in a way that qualitative feedback can’t always match. At TLNT, Natalie Trudel suggests some ways to square that circle, retaining the most useful aspects of ratings but making them more timely, relevant, and specific:

For convenience, the same rating scale is often applied to all areas of an employee’s evaluation; from goals to competencies. This is more often than not a 5-point rating scale (5 – Outstanding, 4 – Exceeds Expectations, 3 – Meets Expectations, 2 – Needs Improvement, 1 – Unacceptable). The problem is that you can’t rate certain evaluation criteria using this scale, and it isn’t fair to expect managers and employees to do so.

As many employers rethink their approach to performance management, one approach many organizations are trying is to replace or supplement the traditional annual performance review with more frequent check-ins. As companies work to meet the demand among their employees for more continuous and detailed feedback, Sarah Kessler at Quartztakes a look at the growing market for technological systems that enable these more frequent conversations:

Startups like Lattice, TinyPulse, and Zugata take the concept to the extreme with quick reviews that are often meant to be completed every week and sometimes coordinated automatically. TinyPulse CEO David Niu, whose customers include Facebook and IBM, promised that a new product launched in February would capture “all the real-time data people crave to measure performance, all while keeping it fun.” By fun, he meant, for instance, that managers and employees can assess progress on their goals with a Tinder-like swipe-to-rate system. …

Perceptions of Amazon’s workforce management took a hit last year when the New York Timespublished a controversial feature alleging that the e-tail giant’s organizational culture was overly competitive and dog-eat-dog, that its performance management practices were hyper-critical, and that employees were effectively encouraged to stab each other in the back to get ahead. Amazon strongly disputed the Times’ characterization of its culture, but since then, the company has taken steps to demonstrate that it cares about its employees, soliciting more feedback about their satisfaction and and piloting programs where teams work part-time with full benefits and others work 30-hour weeks.

One of the main criticisms leveled in the Times piece was of Amazon’s performance review process, which uses “stack ranking” to grade employees on a curve and manage out the lowest performers, and which one organizational psychologist has likened to the “Hunger Games.” Now, GeekWirereports, Amazon is making changes to this system, as many other organizations have done in the past two years:

“We’re launching a new annual review process next year that is radically simplified and focuses on our employees’ strengths, not the absence of weaknesses,” the company confirmed in a statement to GeekWire. “We will continue to iterate and build on the program based on what we learn from our employees.”

The buzz among employees is that Amazon will drop or significantly alter its existing employee ratings program as part of the changes in the broader review process. Amazon currently uses employee ratings as the basis for a forced curve or “stack-rank” system — also known as “rank-and-yank” — a controversial management technique used by companies to get rid of the lowest-performing employees and identify those with the most growth potential.

Peter Cappelli suspects that it is. At HRE, the Wharton professor interprets the recent wave of organizations radically overhauling or even abolishing their performance review processes as a sign of a more fundamental transformation in the nature of this relationship:

By the 1990s, … [t]he growing interest in maximizing shareholder value and the increasing presence of financial thinking in the operation of big companies fueled the idea that employment is really an economic relationship: If you don’t give employees a financial incentive to work hard, they won’t do it. In that context, merit pay became the linchpin of the relationship with employees, and the purpose of performance appraisals was to determine merit pay. The goal was to measure past performance, document that measure and then hand out rewards based on it. …

Dropping performance appraisals — as so many leading companies seem to be doing now — cuts right at the heart of the idea that employment is an economic relationship and the notion that supervision is really just an accounting function: Total up the points and pass out the money. It’s taking us back to an earlier idea that employees actually need to be managed and that the supervisor should be helping them improve their performance and develop their skills. Merit pay still has its place, but that role is simply to encourage the main goal of improving job performance and skills.

Cappelli’s idea that the ongoing trend is not about performance appraisals per se, but rather the broader change in thinking that it represents, is an interesting way to look at the issue. To a certain extent, however, our research disagrees with the notion that “employees actually need to be managed and that the supervisor should be helping them improve their performance and develop their skills.” This describes a heavily top-down way of managing employees.

Instead, we would argue that professional relationships are indeed changing, but rather than reverting to a bygone era of performance management, the emerging management style is more collaborative, with performance and development becoming the shared responsibility of manager and employee. This change is also reflected in recent changes to performance management that focus on more frequent, informal, two-way conversations.

In the past year or two, many organizations have radically reformed their approach to performance reviews, in some cases ditching them altogether, and in many cases keeping the review but getting rid of performance scores or ratings, as GE became the latest major employer to do in July. On the other hand, our research at CEB has found that removing ratings tends to diminish the quality of the review process and doesn’t help performance; others have questioned this new trend as well. Looking at all the changes going on in this field (and drawing heavily on CEB research!), Knowledge@Wharton considers what’s working, what’s not, and what the future holds for performance management:

While the traditional annual performance review is surely dying, [Peter] Cappelli, who is also director of Wharton’s Center for Human Resources, has a wait-and-see attitude about whether employers will really create a different kind of relationship with employees, or end up doing less performance appraisal and replacing it with nothing instead.

“For a lot of companies that are thinking about this change, they are just copying what other companies are doing,” he says. “We will see a lot of false starts on this thing, and then they will discover their relationship with employees is worse off. The thing I would watch is to what extent this is an ideological battle. Is it all about the money, all about rewarding people — that [this is] how things get done, we have to punish the bad employee and fire them? Is it all about the economic incentive? Or is it much more about relationships and developing people and encouraging them to perform better? It’s an ideological divide that has to do with human nature. And to some extent that’s at the heart of this whole issue.” …